Page 16 - GBC winter 2016 Eng

4. The lease arrangement can be an annual fixed rental charge or a fee based upon a percentage of sales. The goal would be to ensure year round overhead costs are paid for from the lease at a minimum. In order to be rewarded for increased activity and use of facility, a percentage of sales arrangement may be preferred if there is an opportunity to grow the business.
5. A major concern with a lease arrangement where a facility has a number of tournaments is the fact that the food and beverage operators will want full pricing for food and beverage. This may result in the green fees and cart fees being discounted.
As such, when entering a lease, the financial impact regarding this occurrence must be evaluated. In some circumstances, this impact may be mitigated by the lessee allowing a discount for tournaments outlined in the lease arrangement.
6. For some owners and operators, the lease evaluation caused them to re-think their own operations. In doing so they were able to re-examine their processes in order to reduce labour costs and structure a menu with a more consistent food cost. During one of our interviews, an operator informed us that they historically made a profit before overhead of 6% to 12%, which did not cover clubhouse overhead. They entered into a lease arrangement for three years that covered their overhead costs. Subsequently, they changed their process model and took back the food and beverage operation and are now making close to 30% before overhead.
7. From a private club perspective, most General Managers would agree that a lease arrangement would be a last resort – the club needs to control activity and service requirements which are different than a restaurant.
OPERATION CHANGES THAT MAY ENHANCE PROFITABILITY
1. Consider reconfiguring the food
and beverage area so that the process is similar to a cash and grab approach or similar to a “Subway” process. This should reduce product cost and reduce labour - with no table service.
2. If your location (higher net worth demographic) and allocation for food and beverage (separate smaller rooms in addition to main dining area) allows for a higher end restaurant experience and you could cater to larger parties (10 to 20 in a separate room), consider a year round experience. This change requires research and an experienced operator.
If it works, this will maintain staff and increase net profit while helping pay for senior manage- ment who also can manage the golf course food and beverage operation. The key will be the research and controlling costs.
EVALuATE YOuR SITuATION
It would appear that more owners and operators are considering a lease arrangement for their food and beverage operation. The main reason is financial performance and the time required to manage the operation.
Brand, control of services and pricing is also essential in maintaining and improving overall club performance. As such, the reputation and experience of the lessee is an essential component.
In the end, each situation needs evaluation; however, most owners and operators would agree that if the facility could make a reasonable profit from the food and beverage operation, then the choice would be to own and operate; thus controlling service and the brand.
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